Election Investing: You Need to Be Like This

President Obama is credited with this bull market in stocks. But let’s not forget it took an “end of the world” like crash to set it up thanks to the real estate debacle. It’s unfortunate and it’s a disservice to investors that the media spends so much time on this election/market stuff.

I’d bet the average investor completely missed this bull market because the media made them so panic stricken they sold at the bottom or near it and they never got back into the market. The most successful investors, the ones I’ve been taught by, like Dick Young, don’t flinch regardless of the market. I will never forget how calm Dick was in the heat of the 2008 crash. When we would talk on the phone he had the same tone, the same advice, and the same approach as he does every day.

Yes we know what’s going on in the markets. But you need to take emotion out of it. I would say it’s the most important thing I help my clients overcome—their emotions regarding their money. You need to have grit. You need to have an inner calmness. And you need to have it every day—especially times like today where emotions are running hot. You need to be cool.

The market clearly is nervous over whether the next occupant of 1600 Pennsylvania Avenue will be Hillary Clinton or Donald Trump. The S&P 500 through Friday logged its longest stretch of declines in 36 years.

The change in election odds over the past several days suggests that the prospect of a Trump victory worries markets more than the prospect of Mrs. Clinton, the status-quo candidate, prevailing. But, in the latter case, investors might soon turn their attention to higher interest rates coming as soon as next month, which could once again roil markets.

Stocks have rallied following elections, too. In 2004, George W. Bush’s re-election prompted a 1% rally, but the market did poorly during that term. Conversely, Bill Clinton’s re-election in 1996 prompted the Dow to jump 1.6% and the tech-fueled bull market continued until the last several months of that term.

The major indexes are still clinging to slim year-to-date gains. Since 1950, the S&P 500 has averaged a 2.5% rise in the final two months of election years and has been higher three-fourths of the time, according toRyan Detrick at LPL Financial. The wild card, though, is this being the eighth year a president has been in office. They are notoriously weak for stocks. The financial crisis in 2008 is the most recent and stark example.

As Brexit taught investors—stocks slid 5.3% in two days but recovered within two weeks—the first reaction isn’t necessarily the right reaction.

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306.
He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.
Please get in touch with E.J. at ejsmith@youngresearch.com.